Google Is Right When It Says That Mobile Payments Are Just Starting

Today Google announced its Google Wallet product, along with partners Sprint, Citi, MasterCard, and First Data. While Google Wallet will initially support Citi-branded MasterCards, the product is open and will accept payment solutions from multiple networks and issuers. Google introduced its Wallet by saying, “This is just starting,” and Google’s right — the path to the new world of transactions that the company painted will be a long and arduous one for consumer product strategists. Why?

Not many phones. Today the number of phones on the market that support Google Wallet is as close to zero as makes no difference — the Nexus S that Sprint launched on May 8th. That will change — by the end of 2012, we expect that virtually every smartphone sold will include NFC.

Not many issuers. Consumers want to be able to use their existing payment options, not have to sign up for a new credit or debit card in order to use their phone.

Not many merchants. Consumers don’t want to have to look for an acceptance mark; they expect that the merchants they frequent will support the payment options in their wallet. While PayPass terminals are becoming more prevalent, they are a long way from ubiquitous.

Not much incentive for consumers. Some consumers might say it’s convenient to just carry their phone, but wallets hold a lot more than just payment instruments. And it’s not clear that pulling out our phone, opening an app, inputting a PIN, and waving our phone at the POS is more convenient than swiping a credit card or exchanging cash.

In this light, Google Offers is the more important announcement, because Offers is what will help catalyze the slow change in consumer behavior by offering additional value tied to Google Wallet transactions. And after all, Google isn’t after the payments themselves; it’s after the associated data tied to the entire commerce process since that’s what it will monetize.